Use of Experience Curves

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    LEARNING CURVE

    CORE THEME = PRACTICE MAKES MAN PERFECTHERMANN EBBINGHAUS

    19th Century German Psychologist

    INDUSTRIAL OBSERVATION

    1925 Wright-Patterson Air force Base USA

    1960s BCG

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    AVERAGE COST vs CUMULATIVE OUTPUT

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    COST/TIME RELATIONHIGH-VOLUME EFFECT

    SHARED EXPERIENCE EFFECT

    PRODUCT DEFINITION

    COST DATA

    MARGINAL VS AVG COST

    INFLATION

    PLANNING HORIZON

    EXTERNAL FACTORS

    NONEQUILIBRIUM CONDITIONS

    LIMITATIONS

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    PRICE AND EXPERIENCE

    Price-Cost Curve

    MARKET SHARE AND PROFITABILITY

    PRACTICALCONSIDERATIONS

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    COMPETITIVE IMPLICATIONS

    STRATEGIES FOR LEADER

    STRATEGIES FOR FOLLOWER

    PRACTICAL

    CONSIDERATIONS (contd.)

    Position Growth Maturity Decline

    Leader Price Maintain

    SOM

    Cut Costs

    Follower SOM Hold SOM Withdraw